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- Japan’s FSA warns KuCoin, Bybit, and 3 others for operating without licenses, breaching Payment Services Act rules.
- Unregistered crypto platforms in Japan risk user funds and lack legal protections under FSA regulations.
- Japan strengthens crypto oversight, flagging five exchanges for failing to meet mandatory registration requirements.
Japan’s Financial Services Agency (FSA) has recently issued a warning on five cryptocurrency exchanges operating without the right license. The exchanges are Bybit Fintech Limited, KuCoin, MEXC Global, Bitget Limited, and Bitcastle LLC. All these platforms have been accused of operating in Japan without registering themselves under the Payment Services Act, which governs such services and requires compliance with several financial measures.
It has raised concerns about users’ safety, security, regulatory oversight, and financial losses. This action is part of the Japanese government’s continued policy of strengthening the laws and upholding the principles of the cryptocurrency market.
Concerns Over Unregistered Crypto Exchanges
The FSA identified several risks associated with the unregistered exchanges. Platforms operating without proper authorization evade necessary oversight, making them vulnerable to management issues. These platforms may fail to segregate customer funds from operational assets, increasing the risk of financial mishandling.
Additionally, users of unregistered exchanges lack legal protection under Japanese law. Customers may find themselves without compensation or support in disputes, insolvency, or security breaches. These gaps highlight the importance of compliance with Japan’s regulatory framework to ensure user safety.
The FSA has previously warned some of these exchanges, including Bybit and MEXC Global, for similar violations. The repeated non-compliance underscores the need for stricter enforcement measures and user awareness.
Japan’s Legal Environment and Compliance
The Japanese government issued its first cryptocurrency laws in early 2017 after various cases, such as the Mt. Gox theft. The Payment Services Act demands that exchanges obtain operational licenses and conform to advanced anti-money laundering standards (AML) and counter-terrorism financing (CFT). Registered exchanges must maintain transparent operations and safeguard user funds to ensure market stability.
The FSA’s latest warnings align with Japan’s broader strategy to enhance regulatory clarity in the cryptocurrency space. The government has also restructured its Web3 leadership, emphasizing innovation while maintaining strict oversight. These efforts aim to position Japan as a blockchain and digital asset development leader.
The global regulatory authorities are also turning their attention to compliance with cryptocurrencies. For instance, the United Kingdom has set its goal to have a complete set of rules for cryptocurrencies by 2026. These developments point to a general shift in the international standardization of crypto platforms.